INTERVIEW-POET CEO sees U.S. ethanol mandate opening markets

By Timothy Gardner

NEW YORK, Dec 17 (Reuters) - The U.S. energy bill's expanded ethanol mandate and improvements in transport bottlenecks will spur new markets -- and higher prices -- for the alternative fuel, the chief executive of the largest U.S. ethanol producer said in an interview on Monday.

The U.S. Senate passed a new energy bill last week, expected to be signed by U.S. President George W. Bush, that would boost the country's blending of alternative fuels, like ethanol, five-fold to 36 billion gallons a year by 2022.

Jeff Broin, CEO of private South Dakota-based ethanol company POET, said the mandate is good for traditional U.S. ethanol made from corn, and for a next generation fuel expected to be made from the woody bits of plants, such as corn cobs and switchgrass.

"It creates a market not only for grain ethanol, but also for cellulosic ethanol," he said.

Broin said POET is spending about $10 million a year in research on cellulosic ethanol, which it hopes to produce in commercial levels by around 2012 to 2013, using corn cobs and waste as feedstocks.

U.S. ethanol capacity has grown by more than a third to about 7.2 billion gallons per year since Jan. 1 as Bush has offered millions of dollars in incentives to blenders and producers in an effort to begin to wean the country off foreign oil.

Transport infrastructure, however, has not kept pace with capacity, pushing the price of ethanol to a low in October of about $1.70 per gallon as the fuel began to pool up around production centers. Ethanol's price has since risen to about $2.00 a gallon, but it is still much less than gasoline, giving oil refiners and blenders purchasing power over producers of the alternative fuel.

Broin said demand for ethanol should rise next year as workers build and fix terminals and equipment to offload rail road cars. "Some infrastructure that was not prepared for ethanol in several areas of the county and those are really the things that have held back the market today," he said.